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US long-term borrowing costs climbed to their highest level since late 2023 and stock futures fell on Monday as the stripping of the country’s triple-A credit rating and progress on President Donald Trump’s massive tax and budget bill fueled concerns about the government’s mounting debt burden.
Yields on 30-year US Treasuries rose as much as 0.13 percentage points to 5.03 percent on Monday, narrowly exceeding a peak reached during the tariff sell-off last month and putting the country’s long-term borrowing costs at their highest point since November 2023. Yields move inversely to prices.
US equity futures for the S&P 500 and the Nasdaq fell 1.3 percent and 1.7 percent, respectively. The US dollar slid 0.7 percent against a basket of its peers.
The rise in bond yields comes after Moody’s downgraded the US’s triple-A sovereign credit rating on Friday evening, warning about rising levels of government debt and a widening budget deficit. On Sunday evening, a congressional budget committee approved a tax bill from the new administration expected to worsen the deficit.
While the downgrade is viewed by analysts as unlikely to fuel forced selling of US Treasuries by big investors, it will add to bondholders’ concerns over the sustainability of the country’s debt burden.
“It’s another warning for a US administration already on bond vigilante alert,” said Pooja Kumra at TD Securities.
Nicolas Trindade, a fund manager at Axa’s asset management arm, said the downgrade was a “stark reminder that the US should not take for granted its ‘exorbitant privilege’ that enabled it to issue debt at a relatively lower cost despite a very high fiscal deficit.”
On Friday, five Republican lawmakers from the House budget committee had voted against the tax bill, stalling its progress. On Sunday, the package narrowly passed the committee vote.
Trump had put pressure on his party’s lawmakers to vote in favor of the bill. “Republicans MUST UNITE behind, ‘THE ONE, BIG BEAUTIFUL BILL!’” he wrote on social media on Friday. “We don’t need “GRANDSTANDERS” in the Republican Party. STOP TALKING, AND GET IT DONE!”
The legislation, which includes hundreds of billions of dollars in new tax cuts that are not offset by changes in spending, is expected to increase the federal deficit, which stood at 6.4 percent of GDP in 2024 — well above levels economists view as sustainable in the longer term.
“The bill is helping drive up the long end,” said Subadra Rajappa, head of US rates strategy at Société Générale.
A bigger deficit means more Treasuries issuance. Some investors moved to sell bonds in anticipation of extra supply and the potential inflationary impacts of the tax cuts.
The US has long been able to run large fiscal deficits because of its economic strength but also because of the structural role that the dollar and US government debt play in the global financial system. But analysts have asked questions over the haven status of American assets as erratic policymaking from Washington unsettles big global investors.
The administration believes the tax cuts will boost growth, raise revenues, and lower the US’s deficit. But the Committee for a Responsible Federal Budget projects the tax bill could add up to $5.2 trillion to the national debt over 10 years.
“The direct driver [of the bonds fall] is the Moody’s downgrade,” said Wei Li, head of multi-asset investments for China at BNP Paribas.
“[But] there are other more fundamental reasons to drive yields up . . . there’s still a lot of uncertainties around tariffs and inflation.”
With the latest developments in the US economy and government policies, it is crucial for investors and businesses to stay informed about the potential impact on financial markets. Subscribe to the White House Watch newsletter for exclusive insights into what Trump’s second term means for Washington, business, and the world. Stay ahead of the curve and make informed decisions in today’s volatile economic landscape. The 2021 Olympics in Tokyo have been a highly anticipated event, with athletes from around the world competing for glory in their respective sports. However, the ongoing COVID-19 pandemic has cast a shadow over the games, leading to concerns about safety and the potential for the spread of the virus.
Despite these challenges, the International Olympic Committee (IOC) has worked tirelessly to ensure that the games can proceed safely. This has included implementing strict testing protocols for athletes and staff, as well as limiting the number of spectators allowed in venues. Additionally, athletes have been required to follow strict guidelines, such as wearing masks and practicing social distancing when not competing.
One of the key concerns surrounding the Olympics has been the potential for outbreaks of COVID-19 among athletes and staff. To address this, the IOC has set up a dedicated medical team to monitor the health of participants and provide rapid testing and contact tracing in the event of a positive case. This has helped to ensure that any outbreaks are quickly contained and prevent the spread of the virus.
Despite these measures, there have been some setbacks during the games. Several athletes have tested positive for COVID-19, leading to their withdrawal from competition and concerns about the potential for further spread. However, the IOC has been quick to respond, implementing additional testing and quarantine measures to prevent any further outbreaks.
Overall, the 2021 Olympics have been a testament to the resilience and determination of athletes and organizers in the face of adversity. While the pandemic has presented numerous challenges, the IOC and its partners have worked tirelessly to ensure that the games can proceed safely and that athletes can compete at the highest level. As the games continue, it is clear that the spirit of the Olympics is alive and well, with athletes from around the world coming together to showcase their talent and dedication to their sports.
